The following is an interview conducted by Archbridge President and CEO Gonzalo Schwarz with Andreas Widmer, focusing on his recently published book, The Art of Principled Entrepreneurship: Creating Enduring Value.
Andreas is an Associate Professor of Entrepreneurship and the director of the Art & Carlyse Ciocca Center for Principled Entrepreneurship at The Catholic University of America’s Busch School of Business. He has worked extensively in the United States, Europe, Asia, Africa and Latin America, has brought more than 100 leading-edge technology products to market, and was an executive in residence at Highland Capital Partners. Previously he co-founded The SEVEN Fund, a philanthropic organization promoting enterprise solutions to poverty and is the author of The Pope & The CEO: Pope Saint John Paul II’s Lessons to a Young Swiss Guard, a book exploring leadership lessons that Widmer learned serving as a Swiss Guard protecting Pope John Paul II and refined during his career as a successful business executive.
Gonzalo Schwarz: To kick off the interview, what is the art of principled entrepreneurship?
Andreas Widmer: Principled Entrepreneurship is a mental model for creating person-centered teams, products and services.
Gonzalo: How do you think principled entrepreneurship is different from other types of entrepreneurship? What makes principled entrepreneurship distinct from just “entrepreneurship”?
Andreas: I suspect when most people hear the term “entrepreneur,” what comes to mind is some brash, bold start-up founder, perhaps specifically in the tech space. That’s certainly one model, but I think that’s a narrow and impoverished view of entrepreneurship, and perhaps discourages people who ought to be interested in entrepreneurship. True entrepreneurship is something anyone can practice, at any level of a company and in any line of work. In the book, I highlight some important variants. For example, there are “employee entrepreneurs,” who innovate and improve the product from within the company. There are “acquisition entrepreneurs” who see how to take an existing company from good to great. There are “franchise entrepreneurs” who can take a model someone else built and make it soar for a lot of people. There are many more, and all of those are in addition to what I would call the classic “startup” entrepreneur. There’s actually a kind of test you can take on the book website that gives you a bit of (unscientific) feedback on what kind of entrepreneur you might be. Because these delineations are fluid and change over a lifetime.
The core of entrepreneurship is an attitude: specifically, the creator attitude. This kind of behavior is both trained and practiced long before someone starts their own company, and even if they never branch out on their own. It is an attitude where someone makes a problem their own, turns it into an opportunity. and solves it profitably through their own excellence. And all of this while staying true to high moral principles and with a sincere effort to serve others.
Gonzalo: What are the differences you see between principled entrepreneurship and crony capitalism?
Andreas: They’re basically opposites! Maybe I should backtrack and define my terms. With principled entrepreneurship, we strive to succeed by meeting needs and solving problems, and living by five basic principles I outline in the book. There’s healthy competition and striving for profit (profit isn’t everything, but it is one important signal that your good or service is actually meeting a need!), but the competition is based on service, stewardship, excellence, and efficient use of scarce resources. Cronyism, which is not actually capitalism at all, but a corruption of the free market system, arises when companies stop competing on excellence and start instead to collude with the political class to keep others out of the market.
It’s difficult to say exactly where the line is that we leave the free market and enter into cronyism, but I think a litmus test for it is the state of entrepreneurship. And I think by that measure, we are advancing rather quickly away from a free market economy.
I’m concerned about the fact that the number of SMES (small and medium enterprises) and startups drastically shrank during the past 40 years. In 1980, new companies made up half of all US businesses. From 1978 to 2012, this declined by 44 percent. The share of new firms as a percentage of total firms today hovers around 8 percent. That’s much lower than the average “business birth rate” of 11 percent between 1980 and 2010.
New companies being created and old ones going out of business is a natural and can even be a healthy process, as long as the total number increases. But when we see the total number decline, I start to worry. Since the economic crisis in the early 2000s, the economy has had trouble creating more new companies. After a strong performance during the teens, the early 2020s returned to a deficit of new companies being founded. There is some indication that the recent COVID-19 crisis will actually represent a boon for the starting of new companies, but whether that will be a temporary spike or result in an actual increase in numbers remains to be seen. I believe that the general trend in the context of the last twenty years remains tenuous and is greatly worrisome.
Many reasons could explain this decline. The internet’s great benefit for consumers was that it “disintermediated”—it took out a lot of middlemen businesses that were previously needed to bring a product successfully from the producer to the consumer. That means a lot of business opportunities in the field of distribution disappeared.
Some analysts, however, point to the financial industry’s change in focus from lending to speculation as the real reason for the decrease of SMEs and startups. Rana Foroohar claimed in a 2016 article in Time Magazine that only a fraction of all the money washing around the financial markets these days actually makes it to “brick and mortar” business. “Around 15% of capital coming from financial institutions today is used to fund business investments, whereas it [investment in brick-and-mortar busi-nesses] would have been the majority of what banks did earlier in the twentieth century.” I don’t think it got any better since she wrote that.
Whatever the case, the consensus is that the number of entrepreneurs and startups is down. Since such activity is and has been the path out of poverty since the founding of our country, this decline in entrepreneurship coincides with a general decrease in social mobility. If you out-earn your parents at the same age, usually between thirty-two and forty years, you display social, or income, mobility. In the 1940s, 92 percent of people out-earned their parents; that number has dropped to 50 percent today. I believe that the decrease of entrepreneurship and social mobility are highly correlated.
We would do well to reverse this decline, because everyone should have access to the American Dream: to be able to use their wisdom and creativity to excel and prosper.
Gonzalo: You speak a lot about the importance of principled entrepreneurship for the American Dream, human flourishing, and social mobility? Can you explain more about the links you see among all those concepts?
Andreas: People can mean different things by “the American Dream,” but here’s how I understand it. I think of it as the promise that in America, because of its commitment to liberty and equal treatment under the law, nothing was promised you. Yet at the same time, if you were willing to work hard and honestly, nothing and nobody would stop you from using your talents and effort in the way you saw fit to build a good life for yourself. Principled entrepreneurship is very akin in this sense to the American Dream. It’s the way to social mobility – something you write a lot about at the Archbridge Institute. As a matter of fact, I refer to some of your research in the book several times. Social mobility, the American Dream and Principled Entrepreneurship are closely interrelated. They are critical components of a well functioning free market economy.
The American Dream is essentially a dream of entrepreneurship— entrepreneurship with specific virtues defined in the pillars of Principled Entrepreneurship. I believe that the fifth pillar—to always think like an entrepreneur in mind and deed—is the lifeblood of the American Dream, wherever that dream is being lived out in the world. It keeps a nation and society young and ensures social mobility because it ensures a constant renewal and reshuffling of economic actors.
Gonzalo: There are many stories of principled entrepreneurs in the book but the one you focus on the most is the story of Art Ciocca. He has been a great influence in your life, both as a friend and teacher of principled entrepreneurship. What are the main things you would like people to know about Art Ciocca, either him as a person and or what do you think is his legacy?
Andreas: I think Art Ciocca was one of most significant business leaders of the last 50 years. He is the personification of Principled Entrepreneurship and the American Dream. Ironically, Art’s name is most likely to endure through his philanthropy, especially his funding of “Ciocca Centers” at The College of the Holy Cross, Santa Clara University, and the Ciocca Center for Principled Entrepreneurship at The Catholic University of America, where I teach. But I would argue that Art’s greatest impact on society is most clearly felt in the innovations he shepherded as co-founder of The Wine Group, especially box wine. Whereas his philanthropy has helped tens of thousands, his entrepreneurship has served hundreds of millions.
Art did not invent box wine, but he did introduce it to the U.S. and he is the one who mainstreamed it. He saw entrepreneurship as more calling than career, and he pursued it with all his heart. He started his company by taking out multiple mortgages and spending his life’s savings, only to discover that he couldn’t compete with bigger winemakers. His best-laid plan to provide affordable, quality glass-bottled wine wasn’t viable. But rather than give up, Art decided to create a completely new market altogether.
The search led Art to an Australian vintner who’d experimented with putting wine in plastic bags. The vintner couldn’t make it work, but Art thought he could, and his company depended on it. By replacing glass bottles with plastic bags in a cardboard box, he could save huge sums on production costs, while also offering bigger volumes. No one else was doing it, and in Art’s mind, that meant he had to.
It was easier said than done. Art personally went through twenty-plus iterations of his new product, desperately trying to stop the rips and leaks that flooded grocery store floors and sparked furious calls to the sales department. He refused to give up, even after his team begged him to stick with traditional bottled wine. He saw what others didn’t: That customers would see tremendous value in this new creation.
He was right. Art’s boxed wine, labeled Franzia, took America by storm. It quickly became the most popular wine in the country, accounting for one of every seven glasses poured here, and now in the world. It took four or five years before competitors got their own box wines to market, but by then, Art’s business had built an indomitable lead. More people than ever before now enjoy wine thanks to him.
Art never apologized for his success because he didn’t have to. It came from serving others – customers, employees, suppliers, and the community – which he saw as the heart of business. Yet he was quick to say that not all profits deserve praise. He despised companies that cheated their customers and took corporate welfare, actions he knew would enrage the public, opening the door to socialism and the destruction of the market economy.
Art’s belief in the moral power of entrepreneurship is urgently needed, especially in fellow business leaders. We live in a time when executives speak of “giving back,” as if they have taken something without offering anything in return, and embrace a politicized “stakeholder capitalism,” which implies that running a profitable company is somehow insufficient or immoral. Beyond the boardroom, there is a growing sense that business is a problem more than a source of the solutions society needs.
Art profoundly disagreed. The challenges facing America are mounting, from soaring inflation to plummeting social mobility, from rising fear to fading self-belief. He maintained that entrepreneurship – truly serving others – was key to overcoming these problems. Instead of turning on business, he hoped people would embrace it as essential to their well-being, and a new generation of principled entrepreneurs would unleash its boundless capacity for good.
Call it the art of principled entrepreneurship – an art that can, and must, enrich America’s future.
Gonzalo: You speak in the book about the importance of work for meaning in life. First, can you explain more about your views on meaning and work, and second, how can principled entrepreneurs help serve the important function of providing meaning through work to their team members or employees?
Andreas: The second pillar of Principled Entrepreneurship declares that to work is to create, and that to create is to be human.
Reflect for just a moment on the fact that we can work yet an animal can’t. I don’t mean that an animal can’t be harnessed for a task. But left to itself, animal culture never fundamentally changes or improves. The bee keeps building hives and the ape keeps managing his harem and eating grass.
This is suggestive, because it shows that work is more than instinctive fulfillment of the basic needs for food and shelter. It’s our inner life, our mental and spiritual dimensions, which define work.
We were made to create, because we were made in the image and likeness of The Creator.
That is what’s unique about being human. And when we create, we in a sense imitate God, participate in God’s creative power. Doing so makes us more fully human. When we work, we have the chance to not only make more, but become more, as we hone our skills, grow in wisdom and experience. Work in the broad sense is an important way we pursue and apply our very personal excellence to live up to our full potential.
We often neglect that aspect of our work. We like to focus only on the outcome and kind of ignore the path itself. Yet it is the activity of work itself that contains the promise of our fulfillment and happiness – not so much the financial or material outcome.
I like the story of the Michelin tire as an illustration of this. Many years ago, when the automotive industry was still in its development, there was a time when engines were able to go 50 or 60 miles an hour, but the tires would blow up at that speed and no one had a solution.
One day Marius Mignol walked into the Michelen factory (Michelen was already manufacturing tires) and asked for a job.
“Do you have any qualifications?” he was asked.
“Not really… I used to help out in a print shop carrying stuff around, but my job was eliminated.”
Well, the HR guy at Michelin actually had a kind of pity on him and hired him to help out in their company print shop where he started the next day.
Now, the owner of the company, Edouard Michelin was an early practitioner of the walking around the floor school of management ,and he knew every single employee and so he of course noticed Marius before long.
He asked the HR manager why Marius was put into the print shop and was told that he had no formal education and that was the only relevant experience he’d had in the past.
Eduard Michelin did not like that approach.
“Don’t you realize that we don’t get to know Marius by having him do what he already knows?
And not only that, he will not learn anything new about himself or his potential either.”
He encouraged his hiring manager:
“Remember… you have to break the stone to find the gem inside. Send him to work in the international finance department!”
Before long, Eduard noticed that Marius was given all the currency conversion calculations and so he inquired. It turns out that Marius quickly figured out a very simple way to calculate the conversion and his innovation was so fast at it that the team gave him all that work.
So Michelin sent Marius on to the engineering department and the rest, as they say is history:
Marius Mignol became the inventor, the creator of the radial tire, which finally allowed cars to go at the speed the engine could generate.
You drove on a radial tire created by Marius the last time you were in a car….
70 years or so after this man was given the opportunity to find and pursue his human excellence and do what we are all called to be: a creator.
Gonzalo: Can you discuss the distinction you make in the book between corporate social responsibility (CSR) and principled entrepreneurship and why you think CSR is misguided? Why do you think CSR or other approaches to viewing the role of business, like only maximizing shareholder value, are incomplete? (GS: it would be great if you can mention your own CSR acronym, create, serve, and reward)
Andreas: Far too often “corporate social responsibility” becomes a way to deemphasize work, products, services, and client/customer service; if our “cause” is important enough, then how good our business is doesn’t matter as much.
The demand for corporate philanthropy and business spending on non-business-related issues is a visible sign that what the company does and how it does it has moved into the background. What I mistrust is that all the new, halo-inducing terms for new business endeavors –terms like B corps, Social Entrepreneurs, Non-Profits, Triple bottom line companies and such– seem to reveal an underlying assumption that business is inherently immoral. It’s a zero-sum game, a dog-eat-dog world, and after you do your dirty deeds in the marketplace, you buy your way to redemption through some form of philanthropy that redeems what you’ve been doing all day.
How often have I come across people – business leaders, students, even clergy! –in business who on the one hand are quick to denounce business for being so utterly immoral, but on the other hand “do what needs to be done” when they themselves actually do business? “It’s just business!” they’ll say … and have no qualms about cheating others or lying about their intentions. Then, once the money has been gained (I’m not saying “made” … because the money they gain is not the result of any kind of actual value add that would “make” money), they turn around and pay their indulgence to buy their conscience free and be re-admitted to society … just like we did 500 years ago.
Don’t get me wrong. I’m not opposed to philanthropy. My office owes much to Art Ciocca’s philanthropy. But what principled entrepreneurship means is business people who don’t need to buy indulgences because what they are doing all day every day is adding value to people lives already. Your good is actually good and your service actually serves. What I do Monday through Friday doesn’t have to be atoned for on the weekend.
What’s commonly known as “Corporate Social Responsibility” (CSR) seems to judge business as an activity that is bad and irredeemable and therefore must do additional work—often making donations—to balance the negative effects of doing business. In this way, CSR often focuses mostly on the financial effects of business rather than the actual work involved and the people doing that work. That, in my estimation, is a big mistake, because work—and by extension business—is not an evil action, and it is not primarily about money.
Which brings me full circle back to work. We humans were made for work. When we work, we can actually create something from “nothing”—we have the power to use our imagination to bring something better into being. In fact, to be creative—to create profitable solutions to customer needs—is the primary objective of our work and, therefore, business. The entire process makes us more human. When we hone our skills, or focus our expertise through work, we flourish as people. That’s why
Gonzalo: The title of the book is called The Art of Principled Entrepreneurship. I liked the use of Art as I think that even though there could be a science or best practices for entrepreneurship it is mostly an art. As a former entrepreneur and now professor of entrepreneurship, what do you think about entrepreneurship as being an art?
Andreas: Principled Entrepreneurship is creating person-centered teams, products and services. Being attentive to individuals suggests that there is no “one size fits all” approach to what we do. Every person’s talents and situation are substantially different from another and that makes the constellations of any team or customer segment even more unique. Yes, there are patterns and best practices, but those do not amount to a “science.” They can’t simply be repeated like an experiment or formula.
That’s when art comes in: each time we ourselves work, join with others or put together a team, we are not only integrating our own talents with others’, but are challenged to do so in a manner that creates value for individual consumers. Doing so is a constantly moving target, it’s an objective that’s never achieved fully, it is always only becoming.
An interesting aspect of practicing this art is that when it doesn’t work, we usually know why, but when it works–when a team creates a product or service that is highly valued by consumers– we can never fully put our finger on why. What was the magic or the exact reason was that it worked out so well? It’s a kind of mystery, as with a work of art.
Gonzalo: In reference to your work with Pope John Paul the second you use a term in the book called Te Voglio Bene. Can you explain what that is and how it relates to the art of principled entrepreneurship?
Andreas: Principled Entrepreneurs foster an environment in which each person can flourish and excel—individually and as a group—through creation, lending support, and offering fair and lasting rewards.
This logically flows from the first principle: if work can help each of us to personally reach our full human potential, then it would only follow that I would like others to have the same opportunity. Your own excellence is always connected to that of others. Mignol’s excellence benefited the HR manager who hired him. It was good for François Michelin, who had not yet even begun working at the company. And Mignol’s excellence has benefited you, who are reading this right now, many times in your life. Without a Principled Entrepreneur like Édouard Michelin, who actively supported and promoted excellence in others, that exponential process would not have occurred.
At the core of our work with others is our intent for them, what we wish for, or from, them. As Pope John Paul II liked to point out to those of us who worked for him, it’s all about love. In English there’s only one word for love, so it sounds odd to “love” your customers, coworkers, and investors. The expression in Italian is more nuanced. You would not say “Ti amo” (“I love you”) to an acquaintance or an employee; that phrase is reserved for familial and romantic love. You’d say “Ti voglio bene,” meaning “I want your good!” The late pope often said he loved that expression because it points to the root of love: wanting the good of the other. When we love someone, we want their good, especially their ultimate good. If I love you, why would I make you do something, give you something, or do something to you that would hinder your fulfillment?
I know it sounds unconventional to bring love into the conversation when talking about building a company, but it’s well worth it. It’s important that not just your customers feel loved in this sense of wanting the good; it’s a game changer for employees as well. Édouard Michelin treated Marius Mignol with love. Giving others the chance to be creative—to actualize their potential—is to truly want their good. To do outstanding work, you first need love. You cannot do good work in a hostile environment. And this is not an outdated sentiment. Whole Foods used to have a set of management principles that began with love. We’re talking about the compassionate kind of love, like empathy. What matters are the small things, because they add up. Think of random acts of kindness supported by a company structure.
Speaking of Pope John Paul II, your service as a Swiss Guard, and connecting to your first book The Pope and the CEO, what do you think religion can teach us or what is the importance of religious values to Principled Entrepreneurship?
Business in and of itself is of course not a religious undertaking, but it can (and in my opinion should) be done with a spiritual attitude. In particular I love the insight that through work, we can make manifest how we are made in the image and likeness of the Creator. This recognition puts my daily work into a completely different setting and influences my motivations and goals. It’s not that it makes me believe that profit is not a business non-negotiable, but it introduces other values into the equation, and orders them. I will not break the law to create a profitable company – neither the civic, moral or spiritual laws that I am subjected to, for example. We all do this already. I mean, most business leaders don’t have to think twice not to employ child labor, pollute or pay bribes to enhance their profits. I know there are many cynics who would argue differently, but any serious research will quickly show that the resounding majority of business owners do not engage in such practices, and that is a good thing. The peace and prosperity of our society depends on it. I think religious and spiritual values can further enhance that peace and prosperity. If the goal of a business is to create goods that are truly good, and to provide services that truly serve, let each one of us determine what “truly good” and “truly serve” really means for us and put that into concrete practice. I think that Art Ciocca did that as the leader at The Wine Group. I hope the book will inspire many more of us to do likewise.